Exam 8: Taxation of Individuals

Eric, who is 18 years old, sells magazine subscriptions door-to-door for commissions. He earned $2,900 this year and he will have to pay tax on this income at his parent's tax rate.

To qualify for the child- and dependent-care credit, the taxpayer must have earned income and must incur qualified expenses for the care of qualified individuals.

Match each statement with the correct term below. -Single

Concerning the credit for child and dependent care I.If a taxpayer's adjusted gross income exceeds $43,000, the child and dependent care credit rate is reduced to 20%. II.No credit is allowed for expenses incurred outside the home. ​

Mr. and Mrs. Bachman, both age 65, file a joint return. In 2018 they have wages of $30,000, dividends of $6,200, municipal bond interest of $3,000 and received $10,300 for the sale of stock that cost $4,000 in 1992. They made a $3,000 contribution to their Roth IRA, paid $4,100 in deductible mortgage interest and real estate taxes and made a $2,500 charitable contribution. What is their gross income, adjusted gross income, and taxable income?

Lillian and Michael were divorced last year. Michael has custody of their two children. Lillian pays $8,600 in child support payments during the current year. Michael pays $12,000 in alimony to Lillian. The total cost of supporting the children is $12,500. Michael and Lillian do not have any special agreement about dependents. How many total dependents may Michael claim for the current year?

Georgia is unmarried and maintains a home in which she and her unmarried daughter Karla age 34, live. Karla is an engineer and earns $52,000 annually. Karla had some severe financial difficulties two years ago and Georgia has been helping her out ever since. Georgia's spouse died in 2017. What is Georgia's filing status for 2018?

Carey and Corrine are married and have two children in college. Jason is a sophomore, and Justine is a senior. They pay $2,000 in tuition and fees for Jason, $600 for his books and $3,000 for his room and board. Justine's tuition and fees are $3,000, her book expense is $800, and her room and board expenses are $2,600. Their adjusted gross income is $165,000. What amount can they claim as a tax credit for the higher education expenses she pays?

George and Kelly have their three children in daycare at an exclusive River Oaks pre-kindergarten center. They incur $20,000 in expenses to keep their children in daycare. George is a physician and Kelly is an assistant district attorney. Together their adjusted gross income is $450,000. What amount can they claim as a child-care credit?

Explain the support test and the gross income test to be a qualifying relative.

Jerry and Lana are married and have two children ages 12 and 10. Their adjusted gross income for 2018 is $424,000. What amount can they claim for the child tax credit?

Susan is a 21 year old full-time student. Susan's support is provided as follows: ? Susan 44\% Susan's parents 48\% Susan's grandmother 8\% Assuming all other tests for dependency not mentioned are satisfied ?

Indicate the proper treatment in the current year for the underlined amounts. Treat each item as an independent event. Indicate whether the amount is deductible or not; if deductible whether it is deductible FOR or FROM AGI; and indicate the amount of the deduction for the current year considering any relevant limitations. Assume the taxpayer has deductions greater than the standard deduction, has AGI of $69,000 without regard to the following transactions and has no "total" income limitations related to itemized deductions. -Moving expenses incurred on a job related move consisting of $2,500 for the moving van, $300 for lodging en route, $100 for mileage during the move, and $80 for meals. Amount: $2,900

Which of the following individuals or couples qualify for the 2018 earned income credit? I.Dennis is single and 25 years old. He is a recent graduate of Holly Technical College. During the year, Dennis cannot find a full-time job, but makes $7,000 as a waiter. II.Matthew and Joan, are both 27, married, and have two children. Joan attends medical school while Matthew stays home with the children. Joan also works part-time at the hospital and earns $9,000. In addition, Joan inherits a substantial amount of money from her grandfather, which pays $5,000 of interest during the year. ​

Indicate the proper treatment in the current year for the underlined amounts. Treat each item as an independent event. Indicate whether the amount is deductible or not; if deductible whether it is deductible FOR or FROM AGI; and indicate the amount of the deduction for the current year considering any relevant limitations. Assume the taxpayer has deductions greater than the standard deduction, has AGI of $69,000 without regard to the following transactions and has no "total" income limitations related to itemized deductions. -Self-employed salesman spends $200 on meals while out of town on business. Amount: $100

Linc, age 25, is single and makes an annual contribution to his church of $2,000. Linc always uses the standard deduction when filing his income tax return. Determine the reduction in Linc's taxable income due to charitable contributions.

Erin is 67, single and has an adjusted gross income of $14,300. She has no dependents and her itemized deductions are $6,000. What is her 2018 taxable income?

Rodrigo and Gwen are married and have 2 children. Gwen earns $65,000, and Rodrigo has a part-time job from which he earns $4,000 during the year. They pay $6,000 in qualified child-care expenses during the year. Rodrigo and Gwen can claim a child-care credit of:

Match each statement with the correct term below. -Dependent

Which of the following properties from an income tax standpoint will be the best one for Juan to contribute to his favorite charity?